Although your Last Will and Testament likely serves as the foundation for your estate plan, if you create a comprehensive estate plan it will include a wide range of additional estate planning tools and strategies that are used to accomplish related goals and objectives. One of the most common additions to a well-rounded estate plan is a trust. Trusts are popular, in part, because of the numerous goals you can achieve using a trust. One of the most important decisions you will have to make when you create your trust is who to appoint as the Trustee. Do not make the common mistake of appointing a Trustee without a thorough understanding of the duties and responsibilities that go along with the position of Trustee.
Trust Basics
Before discussing the duties and responsibilities of a Trustee, you need to learn some trust basics. A trust is a separate legal entity that owns and hold property for the benefit of one or more beneficiaries. All trusts require the following five elements for creation:
- Settlor – the person who creates the trust. A Settlor may also be referred to as the Grantor or Maker of the trust.
- Trustee – an individual or entity that administers the trust terms as well as manages and invests the trust assets.
- Beneficiary – a beneficiary is the person, entity, or even family pet that receives the benefit of the trust assets.
- Terms – created by the Settlor and may be anything that is not illegal or unconscionable.
- Funding – almost anything of value can be used to a fund a trust, including cash, securities, and real property.
Trustee Duties and Responsibilities
Every trust requires the Settlor to appoint a Trustee. In general, the Trustee’s job is to oversee the administration of the trust and manage the trust assets. One of the biggest, and most common, mistakes people make when establishing a trust is to name a spouse, friend, or family member as the Trustee of their trust without really given the matter sufficient thought. People often operate on the mistaken assumption that as long as the individual is someone they trust, that the person will make a good Trustee. That line of thinking often results in a Trustee who is unprepared, and unqualified to successfully administer the trust. Before you decide on a Trustee for your trust, take a moment to read through some of the common duties and responsibilities your Trustee will have:
- Manage and protect trust assets
- Abide by the trust terms unless they are impossible, illegal, or unconscionable
- Invest trust funds using the “Prudent Investor Standard”
- Monitor trust investments
- Communicate with trust beneficiaries
- Resolve conflicts among beneficiaries
- Make discretionary decisions
- Distribute trust funds to beneficiaries
- Approve or deny distributions if given discretionary authority
- Keep trust records
- Prepare and pay trust taxes
As you can see, many of the duties and responsibilities a Trustee has require a certain degree of legal and/or financial skills that the average person does not have. This is one of the reasons why trusts often fail – because the Trustee is simply unprepared for the job. A spouse or friend may have the best possible intentions; however, if he or she does not have the experience and/or skills necessary to successfully handle the position of Trustee, those intentions are not enough to make the trust a success. If you do not have someone in mind who does have the required qualifications to successfully administer your trust, you might consider appointing a professional Trustee. Before you decide who to appoint as your Trustee, sit down and discuss your options with your estate planning attorney to ensure that your choice of Trustee doesn’t threaten the success of your trust.
Contact Us
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns about who to appoint as the Trustee of your trust, contact the experienced Massachusetts estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.
Daniel DeBruyckere
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